How To Make Your Offer Stand OutBy JD Esajian on July 19, 2019
There is more to getting an offer accepted than price. Of course,
price is always a major consideration, but in some circumstances, it may not be the deciding factor. Some sellers are motivated by closing quickly and others simply want minimal headaches. Knowing how to tailor your offer to the seller’s motivation is key to getting more offers accepted. If you dismiss these factors,
don’t know your competition and submit a low-ball offer you will be left wondering what happened. The more borderline offers you can get accepted, at numbers you are comfortable with, add up over the course of the year. Just one or two extra deals a year will have a significant impact on your business bottom line. On properties you really want you need to put some extra time in and submit the right offer. Here are five tips to help your offer stand out.
- Discover Motivation: As we discussed, it is essential to find the motivation of the seller prior to submitting an offer. You may not feel this is important, but in most cases the offers that hit on motivation will get accepted. If the seller acquired the property through probate, they may take a discount to get it off their hands as quickly as possible. If the property is banked owned there is a good chance they will look for the highest cash offer. If the seller is close to foreclosure, they may want some extra time to see if they can work things out. Whatever it is you and your team should dig in and look to find the motivation. In most cases the seller will come right out and tell you what they want, either in the listing or in person, if you are willing to be quiet and listen.
- Quick Closing: Sellers want to get their money as soon as possible. Unless the offer is considerably higher almost all sellers will take the offer that can close the quickest. Almost every seller has heard a horror story of waiting for a buyer to get approved only to have their application fall through at the 11th hour. The reality of the traditional loan process is that there are many hurdles to get to closing. Between the appraisal, insurance and income scrutinizing there are several items that could cause a snag. Sellers know this and don’t want to roll the dice on an extended closing. Even if there are two cash offers a week or two sooner may not seem like much, but often makes a big difference. Therefore, if you have funds that need to be liquidated you should do it well before you start looking at properties. The more prepared you are with your finances, the shorter timeframe you can put on the contract. With funds in place there is no reason why you shouldn’t be able to close in ten days, or sooner.
- Increased Earnest Money Deposit (EMD): Aside from price and closing date there are only a few areas you can make your offer stand out. The most important one is the amount of earnest money deposit. Your EMD is the number that you potentially stand to forfeit if you back out of the deal. Losing the deal due to mortgage rejection is not backing out of a deal. This is if you simply change your mind or get cold feet. The reality is that if you did your homework and want the property the odds of you backing out are slim. An increased EMD shows that you are willing to put some skin in the game and you have some reserve capital in addition to whatever you supplied with your proof of funds. A generic, minimal amount of EMD is often a sign of a weak offer and one that is almost universally dismissed. On the flip side if your EMD is strong it catches the seller’s eye and they take your offer much more seriously.
- No Contingencies: You want to make the path to closing for the seller as clear as you can. This means not only closing with cash but closing void of any contingencies. On the surface, this may seem far too risky and something you should reconsider. The reality is that you can bring your inspector to the property after your initial showing and running the numbers. As long as there are no structural defects you can reflect the condition in your offer. This is especially the case if you plan on knocking down walls or making wholesale changes to the property. Trying to knock a few bucks off the list price by asking for a credit or including a contingency may work on some properties, but in most cases is a giant red flag.
- Use Right Contract/Forms: On properties you really want it is critical to dot all your “I’s” and cross all your “T’s”. This starts with using the right contract form. If you are working without an agent, you can lose the deal before you start based on using the wrong contract. Every state and county are a little different so do your homework and make sure you have the right one. Also, make sure you include any other forms or signature pages the seller is requesting. If they need a proof of funds with the offer, make sure it is current and not from two months ago. Don’t omit signatures on any of the pages and always take an extra minute to make sure you have everything in order prior to submission.
The little things make a big difference when it comes to submitting an offer. Use these five tips to help get more offers accepted.